Two Brokers in Business Sales: How is the Finder's Fee Split?

Introduction to Business Brokerage and Finder's Fees

Business brokerage is a crucial service for selling or purchasing a business. One of the key components of a business sale is the finder's fee, which is a percentage of the sale price paid to the brokerage services. Understanding how this fee is split when multiple brokers are involved is essential for all parties involved in the transaction. This article explores the different scenarios and methods for splitting the finder's fee when two brokers are involved in the sale.

Understanding the Role of Brokers in Business Sales

Brokers play a critical role in facilitating the sale of a business. They are responsible for marketing the business, attracting potential buyers, and negotiating the terms of the sale. The finder's fee is typically a percentage of the sale price that the broker earns for these services. In some cases, there may be two brokers involved in the sale process, each working with different parties to ensure the transaction is completed successfully.

The Four Ways to Split the Finder's Fee

When two brokers are involved, the finder's fee can be split according to the following methods:

Per Previous Agreement: The most straightforward and clear method is to follow the agreement between the two brokers. If the brokers have a clear and signed agreement on how the fee will be split, this is usually respected by all parties involved. Per Prevailing Law and/or Custom: In the absence of a written agreement, the fee may be split based on local laws and industry customs. This is especially relevant if the brokers are based in different jurisdictions. Equally: In some cases, the fee may be split equally between the two brokers to ensure fairness and collaboration. As the Court Orders: If there is a dispute and the matter is taken to court, the judge may rule on how the fee should be split. This option is typically a last resort but can be necessary in complex or contentious cases.

Factors Influencing the Split

The method used to split the finder's fee can be influenced by a variety of factors, including:

The nature of the business being sold The competition between brokers The reputation and experience of the brokers The specific terms of the agreement between the brokers The preferences of the parties involved in the sale

Best Practices for Handling the Finder's Fee Split

Given the potential for confusion and conflict when multiple brokers are involved, it is crucial to have a clear and formal agreement in place. This agreement should specify the percentage that each broker will receive and ensure that both parties are on the same page. Best practices include:

Establishing clear terms and conditions at the beginning of the sale process Writing a detailed agreement that is signed by both brokers Paying attention to local laws and industry customs Ensuring transparency and clear communication throughout the process

Conclusion

When two brokers are involved in the sale of a business, determining how to split the finder's fee can be a complex process. Whether through a previous agreement, prevailing law, custom, or court order, it is essential to have a clear and formal agreement in place to ensure smooth processing and to avoid any disputes. By understanding the various options and best practices, all parties involved can work together to achieve a successful and profitable business sale.